Operating Income Falls $5 Million In Quarter At Cigna

May 01, 1998|By MATTHEW LUBANKO; Courant Staff Writer

Competitive pressures in the health insurance business held down CIGNA Corp.'s operating earnings in the first quarter.

On first-quarter revenues of $5.41 billion, CIGNA's operating income was $255 million, or $3.51 a share fully diluted, compared with 1997 first-quarter operating income of $260 million, or $3.51 a share, on revenue of $4.64 billion. Adjusted for a pending 3-for-1 stock split, CIGNA earned $1.17 a share in the first quarter of 1998, which ended March 31.

FOR THE RECORD - Correction was published May 2, 1998 on Page A2.* CIGNA Corp.'s HMO division saw its net operating income rise from $117 million in the first quarter of 1997 to $131 million in the first quarter of 1998. The cause for the company's flat earnings was incorrect in a story on Page D2 Thursday.

Although CIGNA announced its earnings Thursday after the markets closed, the company's shares rose $4.25, to close at $206.94.

The 1998 operating earnings exclude an after-tax gain of $202 million earned from the sale of CIGNA's individual life insurance and annuity businesses to Lincoln National Corp.

Consolidated net income was $495 million, or $6.82 a share ($2.27 a share adjusted for the 3-for-1 split); the net income reported includes the after-tax gain of $202 million from the sale of the individual life insurance and annuity businesses. For the same quarter in 1997, CIGNA's consolidated net income was $288 million, or $3.89 a share.

Highlights from the first-quarter earnings report include:

*Operating income of $131 million in the HMO and employee life division, compared with operating income of $117 million for the same period in 1997.

* Property-casualty operations earned $50 million, compared with $56 million for the same period in 1997.

* A $571 million gain from the sale of the individual life insurance and annuity businesses will be deferred to future quarters. CIGNA in early January received $1.4 billion from the sale of this unit to Lincoln National.

One analyst said CIGNA's first- quarter earnings came in above consensus estimates.

``Whenever an HMO reports earnings, people hold their collective breath,'' said Cathy Seifert, an analyst with Standard & Poor's Equity group in New York. But CIGNA, unlike other health maintenance organizations, did not weigh in this quarter with bloated expenses and squeezed earnings, Seifert said.

The property-casualty business, Seifert added, reported a slight drop in earnings because insurers, as a whole, saw higher catastrophe losses in the first quarter of 1998, compared with the same three- month period in 1997.

Zygo Corp.

Zygo Corp. said Thursday that its net income for the three months that ended March 31 was $3.5 million, or 29 cents a diluted share, down 4.3 percent from $3.7 million, or 31 cents a share, one year earlier.

Net sales were up at the Middlefield maker of measurement and manufacturing-control instruments, and optical components. Sales totaled $26.9 million in the recent quarter, the third fiscal quarter, up from $22.5 million one year earlier.

But he said Zygo was pleased about the quarter because it was able to realign its structure and complete the integration of four acquisitions ``and realize good financial performance at the same time.''

Orion Capital Corp.

Growth in specialty workers' compensation, marine insurance pools, and investment income helped propel Orion Capital Corp. to a 43 percent gain in net income in the first quarter, which ended March 31.

Orion Capital's net income of $42.2 million, or $1.50 a fully diluted share in this year's first quarter, rose from $29.5 million, or $1.06 a fully diluted share, for the same three-month period in 1997. Net written premiums for the first quarter reached $369 million, up 10 percent from $334.2 million for the same period in 1997.

After-tax operating earnings were $23.4 million, or 83 cents a share in the first quarter of 1998, compared with $19.3 million, or 70 cents a share, in the first quarter of 1997.

Orion Thursday completed the $42.6 million purchase of Strickland Insurance Group Inc., a North Carolina-based writer of auto insurance. Strickland reported $99.4 million in gross written premiums in 1997.

Orion Capital is a specialty writer of property-casualty insurance. The company employs about 500 at its operations in Farmington.

Other Connecticut companies that have issued earnings reports include:

W.R. BERKLEY CORP., Greenwich

First quarter ended March 31 1998 1997

Net Income $21.4m $26.4m

Per Share $0.69 $0.88

Total Revenues $384.6m $329.8m

Premiums* $333.8m $284m

Net Investment Income $56.4m $44.8m

Realized Capital Gains $3.4m $9.3m

NSS BANCORP INC., Norwalk*

1st period ended March 31 1998 1997

Net Income $1.4m $1.0m

Per Share $0.56 $0.42

Assets $668.7m $617.4m

Loans** $423.8m $431.6m

Deposits $455.9m $421.7m

* Parent of NSS Bank. The board of directors voted to increase the quarterly dividend to 13 cents a common share, up from 10 cents. The dividend is payable May 29 to shareholders of record as of May 10.